On July 1, Year 1, Danzer Industries Inc. issued $7,400,000 of 10-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $6,957,843. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. If an amount box does not require an entry, leave it blank.

	Cash	fill in the blank 4b7aa8fc401e063_2	fill in the blank 4b7aa8fc401e063_3
	Discount on Bonds Payable	fill in the blank 4b7aa8fc401e063_5	fill in the blank 4b7aa8fc401e063_6
	Bonds Payable	fill in the blank 4b7aa8fc401e063_8	fill in the blank 4b7aa8fc401e063_9

2. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank.

a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round your answer to the nearest dollar.)

	Interest Expense	fill in the blank d23b0403005cfd0_2	fill in the blank d23b0403005cfd0_3
	Discount on Bonds Payable	fill in the blank d23b0403005cfd0_5	fill in the blank d23b0403005cfd0_6
	Cash	fill in the blank d23b0403005cfd0_8	fill in the blank d23b0403005cfd0_9

b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round your answer to the nearest dollar.)

	Interest Expense	fill in the blank 85d0f0027f8ffbf_2	fill in the blank 85d0f0027f8ffbf_3
	Discount on Bonds Payable	fill in the blank 85d0f0027f8ffbf_5	fill in the blank 85d0f0027f8ffbf_6
	Cash	fill in the blank 85d0f0027f8ffbf_8	fill in the blank 85d0f0027f8ffbf_9

3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank dab6a0fa005a01b_1

4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? Yes

5. Compute the price of $6,957,843 received for the bonds by using Exhibit 5 and Exhibit 7. (Round you PV values to 5 decimal places and the final answers to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount	$fill in the blank dab6a0fa005a01b_3
Present value of the semi-annual interest payments	$fill in the blank dab6a0fa005a01b_4
Price received for the bonds	$fill in the blank dab6a0fa005a01b_5